This is Why PayPal and Square Were Given Price Target Hikes

The price targets on Square and PayPal were given a boost by Deutsche Bank recently with the firm citing that it expects faster adoption of e-commerce and mobile-payment services.

According to Deutsche Bank analyst Bryan Keane, who reiterate a “buy” rating on both companies, a survey of 817 U.S. mobile tech-savvy participants found that “it’s clear that adoption of e-commerce and mobile payment services has accelerated, driven by the pandemic and expanded fintech value proposition.”

Keane raised his price target on Square to $255 from $215 and on PayPal to $275 from $234.

The analyst believes the survey highlighted “the increased secular shift to online payments and higher engagement with fintechs,” particularly PayPal and its mobile payment service Venmo and better penetration and adoption of digital financial services for Square’s Cash App.

“We see fintechs expanding further into traditional financial services, taking share from incumbent banking models, and moving up the sales funnel to become commerce enablers where about 60% of survey participants are interested in PYPL and SQ as a future commerce platform,” Keane noted.

According to Keane, the use of online channels for retail physical goods purchases across the most tech-savvy U.S. mobile payment participants has reached about 83%, according to the survey.

PayPal, Venmo and Square “are well positioned to capture the accelerated shift to online and omnichannel,” said Keane.

BTIG analyst Mark Palmer has also raised his price target on Square recently from $220 to $295.

Palmer has a buy rating on Square and noted that “extraordinary” growth of Square’s Cash App during the pandemic has demonstrated its relevance to large groups whose underserved needs only increased during the crisis.

“The tens of millions of unbanked consumers in the U.S., the small- and medium-sized businesses struggling to survive amidst pandemic-driven restrictions, and those seeking an easy way to buy bitcoin at a time when interest in the cryptocurrency has taken off,” noted Palmer.

According to the analyst, Square’s recent share-price momentum has been due mostly to investors’ use of the stock as a second-derivative play on the increasing interest in bitcoin. Palmer said that most of the benefit to the company from its facilitation of crypto trading comes from the increase in Cash App users that it generates.

Cash App enables customers to buy and sell bitcoin.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.